1. Field of the Invention
This invention generally relates to data processing for business practices, and in particular it relates to financial transaction processing.
2. Background Art
Submission of fraudulent records of charge (ROCs) account for a significant proportion of the incidence of credit card transaction fraud. In order to combat this, credit providers (such as credit card issuers) have been seeking to implement processes by which false submissions of ROCs are reduced, without unduly impacting the time it takes to authorize a legitimate credit transaction.
One known solution, implemented by certain credit providers such as American Express Co. of New York, N.Y., involves generating a two-digit authorization code for each credit transaction, that can be transmitted with a credit approval. The authorization code could then be stored by the credit provider and referenced in the case of a charge dispute or the like. However, there are various limitations to the protection afforded by such a method.
First, the two-digit codes in such systems only include a limited range of possible character strings. In the context of the hundreds of millions of credit transactions that are conducted annually, these limited number of codes will be repeated often, making it easier to fake or forge a two-digit approval in connection with fraudulent ROCs.
Second, the determination of fraudulent charge submissions is limited and credit dispute resolution is continuously delayed by the time it takes for a credit provider to retrieve authorization code information from its records and determine a transaction's authenticity.
Finally, not all merchants in today's transaction networks are equipped to receive and resubmit authorization codes. In early 2003, over 11% of U.S. credit transactions were submitted for payment without a valid authorization code. This gap leaves credit providers open to further fraudulent charge submissions.
It would be possible for a credit provider to simply reject any merchant request for payment up front when it is submitted without the authorization code. However, a significant proportion of charge volume could needlessly be lost since the majority of such submissions are legitimate. This, in turn, could negatively impact a credit provider's revenues. Accordingly, there is a need for a method and apparatus for reducing fraudulent credit transactions that addresses the above-described problems and short-comings in existing methodologies.